Another twist in the tangled tale of Tribune Publishing has rekindled hope that a white knight will free the company's flagship newspaper from a rapacious hedge fund.
The thinking is that a potential battle for control of the company between Alden Global Capital and a Baltimore businessman could set the stage for some local bigwig or group of bigwigs to buy the Chicago Tribune, saving it from Alden's notorious cost-cutting tactics. It's a long-shot at best; more on that later.
Yearning for a public-spirited newspaper savior with deep pockets and high tolerance for red ink is a persistent theme in local media circles. Tribune staffers have been trying to recruit one since Alden became Tribune Publishing's largest shareholder, with 32 percent of the company's stock. No takers so far.
Faith in the healing power of local money also represents a triumph of hope over experience. The fact is, Chicago's moneyed elite bears more than a little responsibility for Tribune Publishing's current predicament.
Like almost all traditional newspaper companies, the publisher of nine major metropolitan dailies around the country has endured long, painful decline over two decades as rising digital rivals siphoned off readers and advertisers.
What the company needed during that time was the kind of strategic leadership that enabled a handful of big newspaper companies—the Wall Street Journal, New York Times, Washington Post—to find formulas for success in the digital age. What it got was a series of missteps that locked in the downward trajectory. Leading lights of Chicago business played key roles in that process.
Think back 20 years, to the dawn of the Internet, when Tribune Co. was a media conglomerate with newspapers, television and radio stations, the Chicago Cubs and even some online properties.
In 2000, a board of directors comprising a who's who of corporate Chicago approved the $6.5 billion acquisition of Times-Mirror, another traditional media company that published several papers including the Los Angeles Times. The deal doubled Tribune's bet on newspapers just as online competition was about to upend the industry.
A few years later, Tribune stock was in the tank and directors were desperate for a way out. So they turned to a rich Chicagoan.Local billionaire Sam Zell took control of Tribune in 2007. The real estate mogul didn't know much about newspapers; his media experience was limited to owning some radio stations. He entrusted management to former radio executives who showed little talent for running a large, diversified media company but a displayed a penchant for embarrassing behavior.
Zell knew plenty about structuring transactions with loads of debt and virtually no risk to himself. But that's not a great approach for a business trapped in what Wall Street calls "secular" decline. Soon, debt from the $8 billion buyout was sucking up cash that Tribune should have been using to fund innovation and new ventures for a changing media market.
Then came the Great Recession, which hit newspapers hard. Heavy with debt, Tribune toppled into bankruptcy. A couple of years after emerging in 2012, Tribune split into two companies, one focused on broadcasting and one that owned newspapers.
Business didn't get much better for the newspaper company, and another local rescuer appeared on the horizon. Backed by a cadre of local investors, tech entrepreneur Michael Ferro acquired a controlling interest in a series of transactions starting in 2016.
Ferro talked a good game, promising to make Tribune a digital dynamo through artificial intelligence and other techno-wizardry. In the end, his tenure was notable for a cringeworthy corporate name change to "Tronc," the sale of the Los Angeles Times, a hasty exit from the chairman post after sexual harrassment allegations, and no fundamental improvement in the business.
Ferro's most consequential move was selling his stake to Alden in 2019. That put the company—by then renamed Tribune Publishing—in the hands of a hedge fund known for gutting newsrooms at the other papers it owns. Tribune Publishing already appears to have embraced the philosophy of its largest shareholder, slashing headcount 30 percent in 2020.
Based on that track record, I have to question the apparently unshakeable belief in local heroes. Yet my colleague Ally Marotti reports that members of the Tribune's newsroom union continue the search.
A school of thought has emerged that newspapers have a future as non-profit entities, an implicit admission that the industry won't be able to find a reliably profitable business model. Several papers have converted to nonprofit status over the past decade, and nearly all have managed to survive—so far.
Is a nonprofit conversion the right path for the Chicago Tribune? Removing the profit imperative could ease pressure to cut costs, helping preserve the paper's journalistic capabilities. But nonprofit status alone won't stem the steady revenue declines that have forced the Tribune and so many other papers to cut staff.
If the top line keeps descending, a nonprofit paper that hopes to maintain staffing levels over the long term would need a steady stream of donations from benefactors willing to underwrite operating losses.
Would a nonprofit newspaper have more leeway to experiment with new products and other innovations that might bring in new revenues? Perhaps, but experimentation costs money, too.
In any case, the issue is moot as long as the Tribune remains part of a larger, for-profit company. The chances of that changing hinge in part on the outcome of behind-the-scenes machinations involving Alden and Maryland hotel magnate Stewart Bainum Jr.
Alden agreed last month to acquire the 68 percent of Tribune Publishing stock that it doesn't already own for $430 million. If that deal goes through, Alden plans to sell the Baltimore Sun and two other papers to a nonprofit Bainum controls for $65 million.
The New York Times reported on Sunday that Bainum now appears to be working on a bid for the entire company. That possibility sparked talk that he might consider selling the Chicago Tribune if he acquires Tribune Publishing.
A lot of ifs there, including the need for approval of any deal by Tribune Publishing's second-largest shareholder, Patrick Soon-Shiong. And even if Bainum bids for Tribune Publishing, wins, and puts the Tribune up for sale, another big obstacle stands between the paper and new life as an independent nonprofit. Somebody would have to bankroll a purchase price likely to run well into the tens of millions, if not higher.
Plenty of people around here have that kind of money. But a year of bush-beating by Tribune staffers haven't flushed out anybody willing to spend it on the paper. Considering the local gentry's prior experience with Tribune ownership, that's not surprising.
That experience also shows that local ownership isn't necessarily the salvation of struggling newspapers. What the Tribune needs is an ownership structure that prioritizes journalism while providing financial stability over the long term. Where it comes from doesn't really matter.
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March 17, 2021 at 06:00PM
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A local wealthy person is not coming to save Chicago Tribune - Crain's Chicago Business
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